Aircastle Limited
Aircastle LTD (Form: 8-K, Received: 02/13/2018 16:49:40)
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported February 13, 2018 (February 13, 2018)
 
 
Aircastle Limited
(Exact name of registrant as specified in its charter)
 
 
 
Bermuda
 
001-32959
 
98-0444035
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
c/o Aircastle Advisor LLC,
One Stamford Forum, 201 Tresser Boulevard, 4 th  Floor, Stamford, CT
 
06901
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (203) 504-1020
(Former name or former address, if changed since last report.)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):  
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 



Section 2 – Financial Information
Item 2.02 Results of Operations and Financial Condition.
On February 13, 2018, Aircastle Limited announced financial results for its fourth quarter and full year 2017 as described in the press release furnished hereto as Exhibit 99.1, which is incorporated herein by reference.
The information furnished pursuant to this Current Report on Form 8-K, including the exhibit hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly set forth as being incorporated by reference into such filing.
Section 9 – Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1
Press Release dated February 13, 2018 which is being furnished hereto pursuant to Item 2.02.






SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
AIRCASTLE LIMITED
            (Registrant)
 
/s/ Aaron Dahlke
Aaron Dahlke
Chief Financial Officer
Date: February 13, 2018






EXHIBIT INDEX  
Exhibit Number
Description






AIRCASTLELOGOA01.JPG     

FOR IMMEDIATE RELEASE
Contact:
Aircastle Advisor LLC    The IGB Group
Frank Constantinople, SVP Investor Relations    Leon Berman
Tel: +1-203-504-1063    Tel: +1-212-477-8438
fconstantinople@aircastle.com      lberman@igbir.com

Aircastle Announces Fourth Quarter and Full Year 2017 Results
Acquired 68 Aircraft and Sold 37 Aircraft in 2017; Owned Fleet of Aircraft at 224
First Quarter 2018 Dividend of $0.28 per Common Share Declared


Key Financial Metrics
Total revenues were $177.4 million for the fourth quarter of 2017 and $796.6 million for the full year
Net income was $55.1 million , or $0.70 per diluted common share, for the fourth quarter and $147.9 million , or $1.87 per diluted common share, for the full year
Adjusted net income (1) was $57.0 million , or $0.72 per diluted common share, for the fourth quarter and $169.6 million , or $2.15 per diluted common share, for the full year
Adjusted EBITDA (1) was $184.6 million for the fourth quarter and $801.6 million for the full year
Cash ROE (1) was 15.0% in 2017 ; net cash interest margin (1) was 8.6%
Highlights
Placed seven wide-bodies on long-term leases in 2017
Acquired 40 aircraft during the fourth quarter for $920 million, and a record 68 aircraft for the full year
Committed to acquire fourteen additional narrow-body aircraft in 2018 for more than $540 million
Sold eight aircraft during the fourth quarter and 37 aircraft for the full year; full year sales included three wide-bodies, four freighters, and our last six classic aircraft
Declared our 47th consecutive quarterly dividend

Stamford, CT.  February 13, 2018 – Aircastle Limited (the “Company” or “Aircastle”) (NYSE: AYR) reported fourth quarter 2017 net income of $55.1 million , or $0.70 per diluted common share, and adjusted net income of $57.0 million , or $0.72 per diluted common share. Net income for the year ended December 31, 2017 was $147.9 million , or $1.87 per diluted common share, and adjusted net income was $169.6 million , or $2.15 per diluted common share. The fourth quarter results included total revenues of $177.4 million

________________________________________
(1) Refer to the selected financial information accompanying this press release for a reconciliation of GAAP to Non-GAAP numbers.



versus $204.7 million in the prior year. For the full year 2017 , total revenues were $796.6 million , an increase of 3.1% , versus $773.0 million in 2016 .
Commenting on the results, Mike Inglese, Aircastle’s CEO, stated, “With $148 million of full year net income Aircastle had a great 2017 and a strong fourth quarter. Throughout the year we worked diligently to extend and transition the leases on seven wide-bodies while selling another three. As a result of these efforts, we have taken care of essentially all of our 2018 lease placement activity. We also opportunistically sold four freighters and our last six classics. Aircastle's aircraft portfolio is in great shape and is well balanced.”
Mr. Inglese concluded, “As competitive investment market conditions are expected to persist into 2018, we believe that Aircastle will once again benefit from our outstanding team, a strong balance sheet and a nuanced investment approach that prioritizes flexibility and disciplined growth, in order to maximize risk-adjusted returns and increase sustainable earnings and operating cash flow over time. By continuing to execute our strategy, we are positioned to continue to grow profitably and create long-term shareholder value.”
Financial Results
(In thousands, except share data)
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
2017
 
2016
 
2017
 
2016
Total revenues
$
177,402

 
$
204,653

 
$
796,620

 
$
772,958

Lease rental and finance and sales-type lease revenues
$
179,284

 
$
191,714

 
$
747,018

 
$
742,410

Adjusted EBITDA (1)
$
184,553

 
$
220,493

 
$
801,584

 
$
767,953

Net income
$
55,120

 
$
67,724

 
$
147,874

 
$
151,453

   Per common share - Diluted
$
0.70

 
$
0.86

 
$
1.87

 
$
1.92

Adjusted net income (1)
$
57,040

 
$
70,525

 
$
169,566

 
$
168,527

   Per common share - Diluted
$
0.72

 
$
0.90

 
$
2.15

 
$
2.14

_______________
(1) Refer to the selected financial information accompanying this press release for a reconciliation of GAAP to Non-GAAP numbers.

Full Year Results
Total revenues in 2017 were $796.6 million , an increase of $23.7 million , while lease rental and finance and sales-type lease revenues were $747.0 million , an increase of $4.6 million . The increase in total revenues was primarily driven by $22.5 million of higher maintenance revenues and higher lease rental and finance and sales-type lease revenues associated with net fleet growth.

Net income for the full year was $147.9 million , down $3.6 million year-over-year, while adjusted net income was $169.6 million , an increase of $1.0 million . Higher total revenues of $23.7 million , higher gains from the sale of flight equipment of $16.0 million , and lower interest expense of $14.4 million offset higher aircraft impairment charges of $51.8 million .

Adjusted EBITDA for the full year was $801.6 million , up $33.6 million versus 2016 , reflecting a $22.5 million increase in maintenance revenue and higher gains from the sale of flight equipment of $16.0 million , partially offset by higher SG&A, excluding share based compensation, of $6.5 million, mostly driven by higher personnel costs and headcount.






Fourth Quarter Results
Total revenues were $177.4 million , a decrease of $27.3 million , or 13.3% , from the prior year. The decrease was due to a $12.4 million decline in lease rental and finance and sales-type lease revenues, and a $12.6 million decrease in maintenance revenues.
Lease rental and finance and sales-type lease revenues were $179.3 million versus $191.7 million the prior year. The 6.5% decrease was driven by lease transition and extension activity, mostly associated with seven wide-body and one freighter aircraft, which represented a combined 10.8% of total fleet net book value at year end.
Net income was $55.1 million , a decrease of $12.6 million , while adjusted net income declined by $13.5 million to $57.0 million . Lower total revenues of $27.3 million and a $5.0 million reduction in gains from the sale of flight equipment were partially offset by an $11.3 million decrease in interest expense and lower depreciation of $6.1 million .

Adjusted EBITDA was $184.6 million , down 16.3% , or $35.9 million . This was primarily driven by lower maintenance revenues of $12.6 million , lower total lease rental and finance and sales-type lease revenues of $12.4 million , and a $5.0 million decline in gains from aircraft sales in the fourth quarter of 2017.
Aviation Assets

During the fourth quarter, we acquired 40 aircraft for $920 million. For the year ended 2017 , we acquired 68 aircraft for $1.6 billion. At the end of 2017, Aircastle's owned fleet of 224 aircraft had a weighted average age of 9.1 years and a weighted average remaining lease term of 5.0 years.

During the fourth quarter of 2017 , we sold eight aircraft, including one freighter and our last five classic aircraft, for total sales proceeds of $68.6 million and a gain on sale of $19.2 million .

During the year ended 2017 , we sold a total of 37 aircraft and other flight equipment for proceeds of $833.6 million and a gain on sale of $55.2 million . The average age of the 37 aircraft sold was 13.8 years with an average remaining lease term of 4.2 years.

Our fleet utilization for the fourth quarter was 99.5% and 99.3% for the full year 2017 . As of December 31, 2017 , Aircastle owned 224 aircraft having a net book value of $6.7 billion . We also manage twelve aircraft with a net book value of $641 million on behalf of our joint ventures with Ontario Teachers’ Pension Plan and IBJ Leasing of Japan.





Owned Aircraft
As of
December 31, 
2017 (1)
 
As of
December 31, 
2016 (1)
Net Book Value of Flight Equipment ($ mils.)
$
6,734

 
$
6,508

Net Book Value of Unencumbered Flight Equipment ($ mils.)
$
5,346

 
$
4,614

Number of Aircraft
224

 
193

Number of Unencumbered Aircraft
195

 
156

Weighted Average Fleet Age (years) (2)
9.1

 
7.9

Weighted Average Remaining Lease Term (years) (2)
5.0

 
5.1

Weighted Average Fleet Utilization for the year ended (3)
99.3
%
 
98.9
%
Portfolio Yield for the year ended (2)(4)
12.2
%
 
12.4
%
Net Cash Interest Margin (5)
8.6
%
 
8.7
%
 
 
 
 
Managed Aircraft on behalf of Joint Ventures
 
 
 
Net Book Value of Flight Equipment ($ mils.)
$
641

 
$
689

Number of Aircraft
12

 
13

_______________
(1)
Calculated using net book value of flight equipment held for lease and net investment in finance leases at period end.
(2)
Weighted by net book value.
(3)
Aircraft on-lease days as a percent of total days in period weighted by net book value.
(4)
Lease rental revenue and interest income and cash collections on finance and sales-type leases for the period as a percent of the average net book value of flight equipment held for lease and our investment in finance and sales-type leases for the period; quarterly information is annualized.
(5)
Refer to the selected financial information accompanying this press release for a reconciliation of GAAP to Non-GAAP numbers. The calculation of Net Cash Interest Margin has been revised in this presentation to include collections from finance and sales-type leases minus interest on borrowings.

Financing Activity

In 2017, we secured $500 million of new financing. During the first quarter of 2017, we issued $500 million in unsecured Senior Notes due 2024 bearing a coupon of 4.125%. On April 17, 2017 we repaid $500 million of maturing, unsecured Senior Notes bearing a coupon of 6.75%. The associated annual interest expense savings is approximately $13.1 million.

Common Dividend

On February 9, 2018, Aircastle’s Board of Directors declared a first quarter 2018 cash dividend on its common shares of $0.28 per share, payable on March 15, 2018 to shareholders of record on February 28, 2018. This is our 47 th consecutive dividend.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Tuesday, February 13, 2018 at 10:00 A.M. Eastern time. All interested parties are welcome to participate on the live call. The conference call can be accessed by dialing (800) 239-9838 (from within the U.S. and Canada) or (323) 794-2551 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "8003549".






A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.aircastle.com. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast. In addition to this earnings release an accompanying power point presentation has been posted to the Investor Relations section of Aircastle’s website.

For those who are not available to listen to the live call, a replay will be available until 1:00 P.M. Eastern time on Thursday, March 15, 2018 by dialing (888) 203-1112 (from within the U.S. and Canada) or (719) 457-0820 (from outside of the U.S. and Canada); please reference passcode “1757279”.

About Aircastle Limited

Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world. As of December 31, 2017 , Aircastle owned and managed on behalf of its joint ventures 236 aircraft leased to 81 customers located in 43 countries.

Safe Harbor

All statements in this press release, other than characterizations of historical fact, are forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not necessarily limited to, statements relating to our proposed public offering of notes and our ability to acquire, sell, lease or finance aircraft, raise capital, pay dividends, and increase revenues, earnings, EBITDA, Adjusted EBITDA, Adjusted Net Income, Cash Return on Equity and Net Cash Interest Margin and the global aviation industry and aircraft leasing sector. Words such as "anticipates," "expects," "intends," "plans," "projects," "believes," "may," "will," "would," "could," "should," "seeks," "estimates" and variations on these words and similar expressions are intended to identify such forward-looking statements. These statements are based on our historical performance and that of our subsidiaries and on our current plans, estimates and expectations and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements; Aircastle can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any such forward-looking statements which are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this press release. These risks or uncertainties include, but are not limited to, those described from time to time in Aircastle's filings with the SEC and previously disclosed under "Risk Factors" in Item 1A of Aircastle's 2016 Annual Report on Form 10- K. In addition, new risks and uncertainties emerge from time to time, and it is not possible for Aircastle to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. Aircastle expressly disclaims any obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances.






Aircastle Limited and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)

 
December 31,
 
2017
 
2016
ASSETS
 
 
 
Cash and cash equivalents
$
211,922

 
$
455,579

Restricted cash and cash equivalents
21,935

 
53,238

Accounts receivable
12,815

 
6,035

Flight equipment held for lease, net of accumulated depreciation of $1,125,594 and $1,224,899, respectively
6,188,469

 
6,247,585

Net investment in finance and sales-type leases
545,750

 
260,853

Unconsolidated equity method investment
76,982

 
72,977

Other assets
141,210

 
148,398

Total assets
$
7,199,083

 
$
7,244,665

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
LIABILITIES
 
 
 
Borrowings from secured financings, net of debt issuance costs
$
849,874

 
$
1,219,034

Borrowings from unsecured financings, net of debt issuance costs
3,463,732

 
3,287,211

Accounts payable, accrued expenses and other liabilities
140,221

 
127,527

Lease rentals received in advance
57,630

 
62,225

Security deposits
130,628

 
122,597

Maintenance payments
649,434

 
591,757

Total liabilities
5,291,519

 
5,410,351

 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
SHAREHOLDERS’ EQUITY
 
 
 
Preference shares, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding

 

Common shares, $0.01 par value, 250,000,000 shares authorized, 78,707,963 shares issued and outstanding at December 31, 2017; and 78,593,133 shares issued and outstanding at December 31, 2016
787

 
786

Additional paid-in capital
1,527,796

 
1,521,190

Retained earnings
380,331

 
315,890

Accumulated other comprehensive loss
(1,350
)
 
(3,552
)
Total shareholders’ equity
1,907,564

 
1,834,314

Total liabilities and shareholders’ equity
$
7,199,083

 
$
7,244,665







Aircastle Limited and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)

 
Three Months Ended December 31,
 
Year Ended December 31,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Lease rental revenue
$
169,931

 
$
187,550

 
$
721,302

 
$
725,220

Finance and sales-type lease revenue
9,353

 
4,164

 
25,716

 
17,190

Amortization of lease premiums, discounts and incentives
(2,934
)
 
(4,934
)
 
(11,714
)
 
(10,353
)
Maintenance revenue
390

 
12,987

 
56,128

 
33,590

Total lease revenue
176,740

 
199,767

 
791,432

 
765,647

Other revenue
662

 
4,886

 
5,188

 
7,311

Total revenues
177,402

 
204,653

 
796,620

 
772,958

Operating expenses:
 
 
 
 
 
 
 
Depreciation
71,218

 
77,298

 
298,664

 
305,216

Interest, net
55,855

 
67,170

 
241,231

 
255,660

Selling, general and administrative (including non-cash share-based payment expense of $2,512 and $2,105 for the three months ended, and $13,148 and $7,901 for the year ended December 31, 2017 and 2016, respectively)
18,113

 
14,989

 
73,604

 
61,872

Impairment of flight equipment

 
1,400

 
80,430

 
28,585

Maintenance and other costs
1,231

 
2,269

 
9,077

 
7,773

Total expenses
146,417

 
163,126

 
703,006

 
659,106

Other income (expense):
 
 
 
 
 
 
 
Gain on sale of flight equipment
19,241

 
24,194

 
55,167

 
39,126

Other
593

 
3,663

 
(2,476
)
 
3,527

Total other income
19,834

 
27,857

 
52,691

 
42,653

Income from continuing operations before income taxes and earnings of unconsolidated equity method investments
50,819

 
69,384

 
146,305

 
156,505

Income tax provision (benefit)
(2,494
)
 
3,525

 
6,042

 
12,307

Earnings of unconsolidated equity method investments, net of tax
1,807

 
1,865

 
7,611

 
7,255

Net income
$
55,120

 
$
67,724

 
$
147,874

 
$
151,453

Earnings per common share — Basic:
 
 
 
 
 
 
 
Net income per share
$
0.70

 
$
0.86

 
$
1.88

 
$
1.92

Earnings per common share — Diluted:
 
 
 
 
 
 
 
Net income per share
$
0.70

 
$
0.86

 
$
1.87

 
$
1.92

Dividends declared per share
$
0.28

 
$
0.26

 
$
1.06

 
$
0.98








Aircastle Limited and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)

 
Year Ended December 31,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
147,874

 
$
151,453

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
298,664

 
305,216

Amortization of deferred financing costs
19,435

 
18,508

Amortization of lease premiums, discounts and incentives
11,714

 
10,353

Deferred income taxes
(8,948
)
 
6,156

Non-cash share-based payment expense
13,148

 
7,901

Cash flow hedges reclassified into earnings
2,202

 
9,662

Security deposits and maintenance payments included in earnings
(17,947
)
 
(23,123
)
Gain on the sale of flight equipment
(55,167
)
 
(39,126
)
Impairment of aircraft
80,430

 
28,585

Other
1,476

 
(6,867
)
Changes on certain assets and liabilities:
 
 
 
Accounts receivable
(6,734
)
 
832

Other assets
(7,655
)
 
(1,089
)
Accounts payable, accrued expenses and other liabilities
13,857

 
(4,014
)
Lease rentals received in advance
(1,478
)
 
3,645

Net cash and restricted cash provided by operating activities
490,871

 
468,092

Cash flows from investing activities:
 
 
 
Acquisition and improvement of flight equipment
(1,038,343
)
 
(1,331,059
)
Proceeds from sale of flight equipment
833,576

 
755,898

Net investment in finance and sales-type leases
(331,721
)
 
(78,892
)
Collections on finance and sales-type leases
32,184

 
19,413

Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales deposits
(7,681
)
 
(9,628
)
Unconsolidated equity method investment and associated costs

 
(18,048
)
Other
(5,122
)
 
(839
)
Net cash and restricted cash used in investing activities
(517,107
)
 
(663,155
)
Cash flows from financing activities:
 
 
 
Repurchase of shares
(4,862
)
 
(37,337
)
Proceeds from secured and unsecured debt financings
675,000

 
1,054,250

Repayments of secured and unsecured debt financings
(878,534
)
 
(588,778
)
Deferred financing costs
(8,540
)
 
(18,890
)
Restricted secured liquidity facility collateral

 
65,000

Liquidity facility

 
(65,000
)
Security deposits and maintenance payments received
192,830

 
171,672

Security deposits and maintenance payments returned
(141,185
)
 
(51,658
)
Dividends paid
(83,433
)
 
(77,137
)
Other

 
(2,283
)
Net cash and restricted cash (used in) provided by financing activities
(248,724
)
 
449,839

Net (decrease) increase in cash and restricted cash
(274,960
)
 
254,776

Cash and restricted cash at beginning of year
508,817

 
254,041

Cash and restricted cash at end of year
$
233,857

 
$
508,817







Aircastle Limited and Subsidiaries
Selected Financial Guidance Elements for the First Quarter of 2018
($ in millions, except for percentages)
(Unaudited)


Guidance Item
Q1:18
Lease rental revenue
$173 - $177
Finance lease revenue
$9 - $10
Maintenance revenue
$0 - $1
Amortization of net lease discounts and lease incentives
$(3) - $(4)
SG&A (1)
$17 - $18
Depreciation
$74 - $76
Interest, net
$57 - $58
Gain on sale
$8 - $18
Full year effective tax rate
8% - 10%

(1)
Includes ~$2.4M of non-cash share-based payment expense.






Aircastle Limited and Subsidiaries
Supplemental Financial Information
(Amount in thousands, except per share amounts)
(Unaudited)

 
Three Months Ended December 31,
 
Year Ended December 31,
 
2017
 
2016
 
2017
 
2016
Revenues
$
177,402

 
$
204,653

 
$
796,620

 
$
772,958

 
 
 
 
 
 
 
 
EBITDA (1)
$
182,633

 
$
220,651

 
$
705,525

 
$
734,989

 
 
 
 
 
 
 
 
Adjusted EBITDA (1)
$
184,553

 
$
220,493

 
$
801,584

 
$
767,953

 
 
 
 
 
 
 
 
Net income
$
55,120

 
$
67,724

 
$
147,874

 
$
151,453

Net income allocable to common shares
$
54,757

 
$
67,141

 
$
146,829

 
$
150,196

Per common share - Basic
$
0.70

 
$
0.86

 
$
1.88

 
$
1.92

Per common share - Diluted
$
0.70

 
$
0.86

 
$
1.87

 
$
1.92

 
 
 
 
 
 
 
 
Adjusted net income (1)
$
57,040

 
$
70,525

 
$
169,566

 
$
168,527

Adjusted net income allocable to common shares
$
56,665

 
$
69,918

 
$
168,368

 
$
167,129

Per common share - Basic
$
0.72

 
$
0.90

 
$
2.15

 
$
2.14

Per common share - Diluted
$
0.72

 
$
0.90

 
$
2.15

 
$
2.14

 
 
 
 
 
 
 
 
Basic common shares outstanding
78,286

 
77,957

 
78,219

 
78,161

Diluted common shares outstanding (2)
78,393

 
78,021

 
78,373

 
78,204

_______________

(1)
Refer to the selected information accompanying this press release for a reconciliation of GAAP to Non-GAAP information.
(2)
For the three and twelve months ended December 31, 2017, includes 107,523 and 153,983 dilutive shares, respectively. For the three and twelve months ended December 31, 2016, includes 63,728 and 42,785 dilutive shares, respectively.






Aircastle Limited and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
EBITDA and Adjusted EBITDA Reconciliation
(Dollars in thousands)
(Unaudited)

 
Three Months Ended December 31,
 
Year Ended December 31,
 
2017
 
2016
 
2017
 
2016
Net income
$
55,120

 
67,724

 
$
147,874

 
$
151,453

Depreciation
71,218

 
77,298

 
298,664

 
305,216

Amortization of lease premiums, discounts and incentives
2,934

 
4,934

 
11,714

 
10,353

Interest, net
55,855

 
67,170

 
241,231

 
255,660

Income tax provision
(2,494
)
 
3,525

 
6,042

 
12,307

EBITDA
182,633

 
220,651

 
705,525

 
734,989

Adjustments:
 
 
 
 
 
 
 
Impairment of flight equipment

 
1,400

 
80,430

 
28,585

Non-cash share-based payment expense
2,512

 
2,105

 
13,148

 
7,901

(Gain) loss on mark-to-market of interest rate derivative contracts
(592
)
 
(3,663
)
 
2,481

 
(3,522
)
Adjusted EBITDA
$
184,553

 
220,493

 
$
801,584

 
$
767,953


We define EBITDA as income (loss) from continuing operations before income taxes, interest expense, and depreciation and amortization. We use EBITDA to assess our consolidated financial and operating performance, and we believe this non-U.S. GAAP measure is helpful in identifying trends in our performance.
This measure provides an assessment of controllable expenses and affords management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieving optimal financial performance. It provides an indicator for management to determine if adjustments to current spending decisions are needed.
EBITDA provides us with a measure of operating performance because it assists us in comparing our operating performance on a consistent basis as it removes the impact of our capital structure (primarily interest charges on our outstanding debt) and asset base (primarily depreciation and amortization) from our operating results. Accordingly, this metric measures our financial performance based on operational factors that management can impact in the short-term, namely the cost structure, or expenses, of the organization. EBITDA is one of the metrics used by senior management and the Board of Directors to review the consolidated financial performance of our business.
We define Adjusted EBITDA as EBITDA (as defined above) further adjusted to give effect to adjustments required in calculating covenant ratios and compliance as that term is defined in the indenture governing our senior unsecured notes. Adjusted EBITDA is a material component of these covenants.






Aircastle Limited and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
Adjusted Net Income Reconciliation
(Dollars in thousands)
(Unaudited)
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2017
 
2016
 
2017
 
2016
Net income
$
55,120

 
$
67,724

 
$
147,874

 
$
151,453

Loan termination fee (1)

 
908

 
2,058

 
4,960

(Gain) loss on mark-to-market of interest rate derivative contracts (2)
(592
)
 
(3,663
)
 
2,481

 
(3,522
)
Write-off of deferred financing fees (1)

 
3,451

 
4,005

 
2,880

Non-cash share-based payment expense (3)
2,512

 
2,105

 
13,148

 
7,901

Securitization No. 1 hedge loss amortization charges (1)

 

 

 
4,855

Adjusted net income
$
57,040

 
$
70,525

 
$
169,566

 
$
168,527

_______________
(1)
Included in Interest, net.
(2)
Included in Other income (expense).
(3)
Included in Selling, general and administrative expenses.

Management believes that ANI, when viewed in conjunction with the Company’s results under U.S. GAAP and the above reconciliation, provides useful information about operating and period-over-period performance and additional information that is useful for evaluating the underlying operating performance of our business without regard to periodic reporting elements related to interest rate derivative accounting, changes related to refinancing activity and non-cash share-based payment expense.






Aircastle Limited and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
Cash Return on Equity Calculation
(Dollars in thousands)
(Unaudited)
Period
CFFO
 
Finance
Lease
Collections
 
Gain on Sale of Flight Equipment
 
Deprec.
 
Distributions
in excess
(less than)
Equity Earnings
 
Cash Earnings
 
Average
Shareholders
Equity
 
Trailing Twelve Month Cash ROE
2011
$
359,377

 
$

 
$
39,092

 
$
242,103

 
$

 
$
156,366

 
$
1,370,513

 
11.4
%
2012
$
427,277

 
$
3,852

 
$
5,747

 
$
269,920

 
$

 
$
166,956

 
$
1,425,658

 
11.7
%
2013
$
424,037

 
$
9,508

 
$
37,220

 
$
284,924

 
$

 
$
185,841

 
$
1,513,156

 
12.3
%
2014
$
458,786

 
$
10,312

 
$
23,146

 
$
299,365

 
$
667

 
$
193,546

 
$
1,661,228

 
11.7
%
2015
$
526,285

 
$
9,559

 
$
58,017

 
$
318,783

 
$
(530
)
 
$
274,548

 
$
1,759,871

 
15.6
%
2016
$
468,092

 
$
19,413

 
$
39,126

 
$
305,216

 
$
(1,782
)
 
$
219,633

 
$
1,789,256

 
12.3
%
2017
$
490,871

 
$
32,184

 
$
55,167

 
$
298,664

 
$
(1,011
)
 
$
278,547

 
$
1,861,005

 
15.0
%


Note: LTM Average Shareholders’ Equity is the average of the most recent five quarters period end Shareholders’ Equity. Management believes that the cash return on equity metric (“Cash ROE”) when viewed in conjunction with the Company’s results under U.S. GAAP and the above reconciliation, provide useful information about operating and period-over-period performance, and provide additional information that is useful for evaluating the underlying operating performance of our business without regard to periodic reporting impacts related to non-cash revenue and expense items and interest rate derivative accounting, while recognizing the depreciating nature of our assets.






Aircastle Limited and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
Net Cash Interest Margin Calculation
(Dollars in thousands)
(Unaudited)
Period
 
Average NBV
 
Quarterly Rental Revenue (1)
 
Cash Interest (2)
 
Annualized Net Cash Interest Margin (1)(2)
Q1:12
 
$
4,388,008

 
$
152,242

 
$
44,969

 
9.8
%
Q2:12
 
$
4,542,477

 
$
156,057

 
$
48,798

 
9.4
%
Q3:12
 
$
4,697,802

 
$
163,630

 
$
41,373

 
10.4
%
Q4:12
 
$
4,726,457

 
$
163,820

 
$
43,461

 
10.2
%
Q1:13
 
$
4,740,161

 
$
162,319

 
$
48,591

 
9.6
%
Q2:13
 
$
4,840,396

 
$
164,239

 
$
44,915

 
9.9
%
Q3:13
 
$
4,863,444

 
$
167,876

 
$
47,682

 
9.9
%
Q4:13
 
$
5,118,601

 
$
176,168

 
$
49,080

 
9.9
%
Q1:14
 
$
5,312,651

 
$
181,095

 
$
51,685

 
9.7
%
Q2:14
 
$
5,721,521

 
$
190,574

 
$
48,172

 
10.0
%
Q3:14
 
$
5,483,958

 
$
182,227

 
$
44,820

 
10.0
%
Q4:14
 
$
5,468,637

 
$
181,977

 
$
44,459

 
10.1
%
Q1:15
 
$
5,743,035

 
$
181,027

 
$
50,235

 
9.1
%
Q2:15
 
$
5,967,898

 
$
189,238

 
$
51,413

 
9.2
%
Q3:15
 
$
6,048,330

 
$
191,878

 
$
51,428

 
9.3
%
Q4:15
 
$
5,962,874

 
$
188,491

 
$
51,250

 
9.2
%
Q1:16
 
$
5,988,076

 
$
186,730

 
$
51,815

 
9.0
%
Q2:16
 
$
5,920,030

 
$
184,469

 
$
55,779

 
8.7
%
Q3:16
 
$
6,265,175

 
$
193,909

 
$
57,589

 
8.7
%
Q4:16
 
$
6,346,361

 
$
196,714

 
$
58,631

 
8.7
%
Q1:17
 
$
6,505,355

 
$
200,273

 
$
58,839

 
8.7
%
Q2:17
 
$
6,512,100

 
$
199,522

 
$
55,871

 
8.8
%
Q3:17
 
$
5,985,908

 
$
184,588

 
$
53,457

 
8.8
%
Q4:17
 
$
6,247,581

 
$
187,794

 
$
53,035

 
8.6
%
_______________
(1)
The second quarter of 2017 excludes a non-recurring, $7.0 million accelerated collection received from a lessee in connection with a finance lease.
(2)
Excludes loan termination payments of $3.0 million in the second quarter of 2013, $1.5 million and $3.5 million in the first quarter and fourth quarter of 2016, respectively, and loan termination payments of $1.0 million in both the second and third quarters of 2017.

We define net cash interest margin as lease rentals from operating leases, interest income and cash collections from finance and sales-type leases minus interest on borrowings, net settlements on interest rate derivatives and other liabilities adjusted for loan termination payments divided by the average net book of flight equipment (which includes net investment on finance and sales-type leases) for the period calculated on a quarterly and annualized basis.

Management believes that net cash interest margin, when viewed in conjunction with the Company’s results under U.S. GAAP and the above reconciliation, provides useful information about the effective deployment of our capital in the context of the yield on our aircraft assets, the utilization of those assets by our lessees, and our ability to borrow efficiently.






Aircastle Limited and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
Reconciliation of Net Income Allocable to Common Shares
(In thousands)
(Unaudited)

 
Three Months Ended
December 31, 2017
 
Year Ended
December 31, 2017
Weighted-average shares:
Shares
 
Percent
 
Shares
 
Percent
Common shares outstanding – Basic
78,286

 
99.34
 %
 
78,219

 
99.29
 %
Unvested restricted common shares
518

 
0.66
 %
 
557

 
0.71
 %
Total weighted-average shares outstanding
78,804

 
100.00
 %
 
78,776

 
100.00
 %
 
 
 
 
 
 
 
 
Common shares outstanding – Basic
78,286

 
99.86
 %
 
78,219

 
99.80
 %
Effect of dilutive shares (1)
108

 
0.14
 %
 
154

 
0.20
 %
Common shares outstanding – Diluted
78,393

 
100.00
 %
 
78,373

 
100.00
 %
 
 
 
 
 
 
 
 
Net income allocation
 
 
 
 
 
 
 
Net income
$
55,120

 
100.00
 %
 
$
147,874

 
100.00
 %
Distributed and undistributed earnings allocated to unvested restricted shares (2)
(363
)
 
(0.66
)%
 
(1,045
)
 
(0.71
)%
Earnings available to common shares
$
54,757

 
99.34
 %
 
$
146,829

 
99.29
 %
 
 
 
 
 
 
 
 
Adjusted net income allocation
 
 
 
 
 
 
 
Adjusted net income
$
57,040

 
100.00
 %
 
$
169,566

 
100.00
 %
Amounts allocated to unvested restricted shares
(375
)
 
(0.66
)%
 
(1,198
)
 
(0.71
)%
Amounts allocated to common shares – Basic and Diluted
$
56,665

 
99.34
 %
 
$
168,368

 
99.29
 %
_______________
(1)
For the three months and year ended December 31, 2017, distributed and undistributed earnings to restricted shares were 0.66% and 0.71%, respectively, of net income and adjusted net income. The amount of restricted share forfeitures for all periods present is immaterial to the allocation of distributed and undistributed earnings.
(2)
For all periods presented, dilutive shares represented contingently issuable shares.






Aircastle Limited and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
Reconciliation of Net Income Allocable to Common Shares
(In thousands)
(Unaudited)

 
Three Months Ended
December 31, 2016
 
Year Ended
December 31, 2016
Weighted-average shares:
Shares
 
Percent
 
Shares
 
Percent
Common shares outstanding – Basic
77,957

 
99.14
 %
 
78,161

 
99.17
 %
Unvested restricted common shares
677

 
0.86
 %
 
654

 
0.83
 %
Total weighted-average shares outstanding
78,634

 
100.00
 %
 
78,815

 
100.00
 %
 
 
 
 
 
 
 
 
Common shares outstanding – Basic
77,957

 
99.92
 %
 
78,161

 
99.95
 %
Effect of dilutive shares (1)
64

 
0.08
 %
 
43

 
0.05
 %
Common shares outstanding – Diluted
78,021

 
100.00
 %
 
78,204

 
100.00
 %
 
 
 
 
 
 
 
 
Net income allocation
 
 
 
 
 
 
 
Net income
$
67,724

 
100.00
 %
 
$
151,453

 
100.00
 %
Distributed and undistributed earnings allocated to unvested restricted shares (2)
(583
)
 
(0.86
)%
 
(1,257
)
 
(0.83
)%
Earnings available to common shares
$
67,141

 
99.14
 %
 
$
150,196

 
99.17
 %
 
 
 
 
 
 
 
 
Adjusted net income allocation
 
 
 
 
 
 
 
Adjusted net income
$
70,525

 
100.00
 %
 
$
168,527

 
100.00
 %
Amounts allocated to unvested restricted shares
(607
)
 
(0.86
)%
 
(1,398
)
 
(0.83
)%
Amounts allocated to common shares – Basic and Diluted
$
69,918

 
99.14
 %
 
$
167,129

 
99.17
 %
_______________
(1)
For the three months and year ended December 31, 2016, distributed and undistributed earnings to restricted shares were 0.86% and 0.83%, respectively, of net income and adjusted net income. The amount of restricted share forfeitures for all periods present is immaterial to the allocation of distributed and undistributed earnings.
(2)
For all periods presented, dilutive shares represented contingently issuable shares.